The Financial Supervisory Service, Will It Not Pressure Companies with 'Correction Requests' This Year?

Capital Markets and Accounting Division Work Report
Prioritizing Fundraising Management Considering the Business Environment

The Capital Markets Division of the Financial Supervisory Service (FSS) plans to supervise companies to ensure there are no issues with their fundraising this year, considering the economic recession. It also intends to pay attention to market stability in relation to external variables such as the inauguration of President Donald Trump. Investigations will strictly address unfair trading issues like the proliferation of political theme stocks, as in previous years.

According to the FSS on the 15th, executives are currently conducting work reports. The capital markets and accounting divisions are divided into △financial investment △disclosure investigation △accounting parts.

The disclosure investigation part has identified two top priorities this year: corporate fundraising and market stability. Considering the difficulties companies face due to the economic downturn, they plan to focus more on fundraising. An FSS official stated, "Unlike last year, we do not plan to intervene aggressively in corporate fundraising such as rights offerings. However, any actions that cross the line will be strictly punished."

Last year, the FSS actively intervened in corporate fundraising activities in the capital market. The FSS issued correction requests for 14 cases of rights offerings by listed companies. This is up to three times the number of correction requests in the past three years: 4 in 2021, 7 in 2022, and 8 in 2023. The surge in correction requests is largely due to the government's 'Corporate Value-Up Program.' This program prioritized communication with shareholders over corporate fundraising. Representative cases include the merger related to the Doosan Group's restructuring and the rights offering by Isu Petasys.

This year, disclosure work is expected to see a shift in this policy. Unless there are special reasons, corporate fundraising will be prioritized. This is interpreted as a decision not to hinder fundraising in the capital market as much as possible due to the worsening business environment caused by the economic recession.

Earlier, the Korea Economic Research Institute (KERI) announced that the comprehensive Business Survey Index (BSI) for the top 600 companies by sales showed a BSI forecast of 84.6 for January this year. This is a 12.7-point drop from the previous month (97.3), marking the largest decline in 4 years and 9 months since April 2020 (a 25.1-point drop) when COVID-19 was spreading rapidly.

A BSI above the baseline of 100 indicates a positive economic outlook compared to the previous month, while below 100 indicates a negative outlook. Since falling below 100 in April 2022 (99.1), the BSI has remained below the baseline for 34 consecutive months. Notably, the January BSI forecast recorded the longest continuous downturn since the BSI survey began in January 1975.

However, the investigation bureau and the Capital Markets Special Judicial Police (Special Judicial Police) will continue to focus on strict punishment for unfair trading as in the previous year. The FSS explained that it will not compromise on actions that disrupt market order. In particular, it plans to strengthen crackdowns and penalties to prevent the proliferation of political theme stocks exploiting political instability.